Von Baumbach v. Sargent Land Co.,
242 U.S. 503 (1917)

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U.S. Supreme Court

Von Baumbach v. Sargent Land Co., 242 U.S. 503 (1917)

Von Baumbach v. Sargent Land Company

Nos. 286-288

Argued December 13, 14, 1916

Decided January 15, 1917

242 U.S. 503


Corporations organized under the laws of Minnesota, not for charitable or eleemosynary purposes but for the pecuniary advantage of their shareholders, held "organized for profit" within the meaning of the Corporation Tax Law of August 5, 1909.

Page 242 U. S. 504

The decision whether a corporation is carrying on business within the meaning of the Corporation Tax Law must depend in each instance upon the particular facts before the court; no particular amount of business is required.

A corporation which has not reduced its activities to owning and holding property and the distribution of its avails, but maintains its organization for continued efforts in pursuit of profit and for such activities as are therein essential, is carrying on business within the meaning of the act.

Respondent corporations, besides receiving and distributing among their shareholders the royalties from a number of outstanding long-term "mining leases," employed another company to inspect the lessees' operations and keep them to their contracts, made some mining explorations at expense on other parts of their properties, sold or leased other parcels and sold some timber; held that they were carrying on business within the meaning of the Corporation Tax Law.

Quaere whether this Court, in determining whether royalties under mining leases are income subject to the Corporation Tax Law, is constrained to follow the decisions of the highest court of the state in which the leased property is situate holding that such royalties are rents and profits.

The "mining leases" involved in these cases were not equivalent to sales of property, and the moneys paid by the lessees to the respondents were not converted capital, but rents or royalties, and as such were income, proper to be included in measuring their taxes under the Corporation Tax Law. Stratton's Independence v. Howbert, 231 U. S. 399; Stanton v. Baltic Mining Co., 240 U. S. 103.

The depletion of a mine resulting from the removal of ore in the course of its operation is not a "depreciation of property" for which a deduction may be made under the Corporation Tax Law.

219 F. 31 reversed.

The case is stated in the opinion.

Page 242 U. S. 511

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